First steps: Basic tips for getting started investing in DeFi

cointelegraph.com:

Decentralized finance (DeFi) protocols have diversified investment opportunities in the crypto industry by facilitating novel and innovative passive income generation schemes.

Delving a bit into how they work, DeFi systems are based on blockchain technology and run on programmable chains such as the BNB Chain and the Ethereum Network.

The chains use decentralized peer-to-peer (P2P) finance architectures to cut out the middleman and enable lending, borrowing and liquidity provision. This leads to higher interest rates compared to those provided by regulated financial institutions such as banks. 

For perspective, many regulated banks provide interest rates of less than one percent per year, while some DeFi platforms offer interest rates of over 20% per year.

Investing in DeFi provides numerous benefits. Yubo Ruan, CEO and founder of Parallel Finance, told Cointelegraph:

“DeFi’s speed and efficiency create immense opportunities for moving in and out of positions very quickly for arbitrage for example. Additionally, no matter what background or money you have access to, you can have access to DeFi,” he said, adding, “There are more than a billion people who are unbanked and unable to use traditional markets. This is a massive benefit for the unbanked to access and invest with DeFi in a world where banks simply don’t exist for them.”

There are over 100 DeFi projects in the crypto sector today. As such, finding the ideal project can be challenging, especially for newbie investors. The following is a breakdown of factors to consider when choosing a well-grounded DeFi project.

Total value locked (TVL) should be considered when looking for an outstanding DeFi project. A high TVL is a strong indicator of investor confidence in a platform